What is the minimum annualized earnings threshold for a Chesters franchisee's employee for a noncompetition covenant to be enforceable?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
agreements require a franchisee to reimburse the franchisor for court costs or expenses, including attorneys' fees, such provision applies only if the franchisor is the prevailing party in any judicial or arbitration proceeding.
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- Noncompetition Covenants. Pursuant to RCW 49.62.020, a noncompetition covenant is void and unenforceable against an employee, including an employee of a franchisee, unless the employee's earnings from the party seeking enforcement, when annualized, exceed $100,000 per year (an amount that will be adjusted annually for inflation). In addition, a noncompetition covenant is void and unenforceable against an independent contractor of a franchisee under RCW 49.62.030 unless the independent contractor's earnings from the party seeking enforc
Source: Item 23 — **RECEIPTS (FDD pages 48–197)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, a noncompetition covenant is void and unenforceable against a Chesters franchisee's employee if the employee's annualized earnings from the party seeking enforcement do not exceed $100,000 per year. This amount will be adjusted annually for inflation. This stipulation is based on Washington state law (RCW 49.62.020).
For a Chesters franchisee, this means that any non-compete agreement they attempt to enforce against an employee in Washington state is only valid if that employee earns more than $100,000 annually. If the employee earns less than this threshold, the non-compete agreement is not enforceable. This protects lower-earning employees from being restricted in their future employment opportunities.
It is important to note that this specific clause applies to employees in Washington state due to the state's specific regulations on noncompetition covenants. The FDD also mentions that any conflicting provisions in the franchise agreement are void and unenforceable in Washington. This highlights the importance of franchisees understanding the specific state laws that may impact their franchise operations, particularly concerning employment agreements.